Your estate includes many different types of assets-homes, cars, bank accounts, insurance policies, retirement accounts and investments. You want your entire estate to pass to your heirs according to your wishes and in a quick and inexpensive manner, and you want as much of it to go to your heirs as possible. A well-constructed estate plan can help you accomplish those goals.
At a minimum, an estate plan should include a durable financial power of attorney and a will. An estate plan could also include various types of trusts. Assets held in trust do not have to pass through probate and may also avoid some estate taxation. There are no federal taxes owed on estates of less than $1.5 million, and there is a possibility that the estate tax will disappear altogether, but it is important that every person review their assets in aggregate and formulate a plan for how best to distribute their wealth after their death.
What is durable power of attorney for finances?
Durable power of attorney for finances is an essential part of an estate plan. It gives someone you trust the legal authority to handle your finances if you are unable to do so yourself. "Durable" power of attorney means that the agreement will remain in effect if you become incapacitated. Executing a durable power of attorney is relatively simple and inexpensive-and spares your family great cost and inconvenience if they must seek authority over your finances through the courts.
Durable power of attorney is a written document between you, the principal, and someone you authorize to act on your behalf, called the agent or attorney-in-fact.
The agreement goes into effect as soon as you sign it. You must clearly indicate that you want the power of attorney to be "durable." If you do not, the agent's authority over your finances ends if you become incapacitated. Durable power of attorney remains in effect until you die or cancel the agreement.
Do I need durable power of attorney if I co-own all assets with my spouse?
Your spouse is not automatically authorized to handle all your finances if you become incapacitated. If you and your spouse jointly own bank accounts, your spouse can certainly access all those funds as a co-owner. However, for bigger and more complex transactions, such as those involving real estate and securities, your spouse may not be able to make decisions for you if you become incapacitated. Durable power of attorney gives your spouse the authority to act on your behalf with regard to all your finances.
What powers can I give to my agent?
You can give your agent the power to handle all your finances, or you can specify that your agent only has the power to handle some of your finances. You can spell out the responsibilities you want them to have in the document.
The financial authority given to agents could include accessing your bank accounts to pay your bills, collecting Social Security for you, managing your real estate property, filing and paying your taxes, investing your money in stocks and bonds, and operating your small business.
Whatever level of authority you give your agent, they are required by law to always act in your best interest. Agents have what is called a fiduciary duty to you and cannot take advantage of the situation.
How do I give someone durable power of attorney?
It is simple. Just complete and sign the necessary legal forms. Many estate-planning software programs include durable power of attorney forms and are available on the Internet.
You must have the signed document notarized. In some states, witnesses must also watch you sign it.
Under what circumstances does durable power of attorney end?
Durable powers of attorney end when you die. Your agent has no authority to make financial decisions for you after your death, including making your burial arrangements or transferring your assets to your heirs. Those responsibilities fall to the executor of your will. You could, of course, make the same person your agent and your executor.
Durable power of attorney also ends if you cancel the agreement at any time, and no reason is needed, as long as you are mentally competent. In some states, the agreement ends if you get divorced and your spouse was previously named as your agent. A court can invalidate your agreement if it decides you were unduly influenced, tricked or incompetent at the time you signed it.
Can I name two people to be my agents?
Yes. But both agents must agree on all decisions. If they do not agree, they may have to go to court, which defeats the purpose of executing durable power of attorney in the first place.